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Determinants and Consequences of Tax Service Provider Choice in the Not-for-Profit Sector


Stevanie S. Neuman


Texas A&M University - Department of Accounting

Thomas C. Omer


University of Nebraska-Lincoln

Anne Thompson


University of Illinois at Urbana-Champaign

April 25, 2013


Abstract:     
This study examines the determinants and consequences of tax service provider choice among not-for-profit (NFP) organizations. Understanding how clients choose among professional services firms for tax services is important both because of the economic significance of tax service revenues to public accounting firms and because of regulatory changes to the market for tax services following the Sarbanes-Oxley Act. Because public accounting firms compete with law and consulting firms for tax clients, we examine whether factors that influence the organizational structure of professions – client proximity and knowledge availability – influence clients’ decisions to purchase tax services. Using data from the U.S. NFP sector where the decision to purchase tax services is observable for all organizations, we find that NFPs are less likely to retain their auditor for tax services as knowledge availability and distance to the auditor increase. We document that self-preparing NFPs are more likely to misreport executive compensation on their return, and we find no differences in misreporting between auditor and non-auditor paid preparers. Finally, we find that NFPs receive lower donor contributions after changing from paid preparers to self-preparing the Form 990.

Number of Pages in PDF File: 66

Keywords: Tax Provider Choice, Non-Audit Services, Nonprofit Organizations, Donor Contributions

JEL Classification: M40, M41, M42, M49

working papers series


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Date posted: May 23, 2011 ; Last revised: May 21, 2013

Suggested Citation

Neuman, Stevanie S., Omer, Thomas C. and Thompson, Anne, Determinants and Consequences of Tax Service Provider Choice in the Not-for-Profit Sector (April 25, 2013). Available at SSRN: http://ssrn.com/abstract=1845831 or http://dx.doi.org/10.2139/ssrn.1845831

Contact Information

Stevanie S. Neuman (Contact Author)
Texas A&M University (TAMU) - Department of Accounting ( email )
430 Wehner
College Station, TX 77843-4353
United States

Thomas C. Omer
University of Nebraska-Lincoln ( email )
Lincoln, NE 68588
United States
Anne Thompson
University of Illinois at Urbana-Champaign ( email )
360 Wohlers Hall
1206 South Sixth Street
Champaign, IL 61820
United States
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